Virtual Accountant | Financing Options For Small Businesses
Even though itís much easier for small businesses to qualify for loans for hard assets than operating capital, virtual accountant says that sometimes businesses have a hard time qualifying for loans altogether. Business owners often need to loan money in order to finance assets they need in order to grow their business, but have maximized their loans with traditional banks. Business owners often have no idea that there are programs that can help them qualify for different loans, so that they can continue growing their business by purchasing the assets they need.
Many business owners donít know about a Canada small business financing program, which can help small businesses qualify for loans. Businesses that qualify need to be less than $10 million in revenue says virtuals accountant. This is a wide variety of businesses that can apply for this loan. Just because it is the act by the government, business owners may be able to qualify more easily for this when traditional financial institutions and said no. No these businesses may be more able to qualify, this doesnít mean all businesses that apply are automatically going to get it. Businesses still need to apply, qualify for the loan and potentially put a personal guarantee on the loan in case they default.
Any business owner is thinking about applying for a loan should do their due diligence before they apply, and ensure that they do a business plan with their virtual accountant prior to applying for this loan. Getting a formal plan in place is a great first step to business owners succeeding in getting this loan. Not only will this business loan help entrepreneurs qualify for the loan, it will help them create a plan for what happens when they qualify and needs to start paying it back.
Many entrepreneurs may think that because this is a government loan, the interest will be astronomical says virtual accountant. While this is not an extremely low interest loan, itís also not exceptionally high either typically, the interest rate for this loan is prime +3%. Banks are not able to choose their own rate, otherwise it might be more. This is not an exceptionally low rate, but itís also not a high rate either. This is considered a good midrange commercial rate. Business owners also need to realize that thereís going to be an application fee that works out to be 2% one time only, when the business first applies.
Business owners who need to qualify for loans, but have been turned down from traditional things should know about the Canada small business financing program that they may be able to qualify for when traditional loans have been ruled out. As long as they are making under $10 million a year, business owners can qualify for the loan, which can give them up to $350,000 in order to purchase hard assets or leaseholder improvements, or up to $1 million in real estate, or a combination of the two.
Business owners often donít realize that as their business ages, they are ability to qualify for loans decreases says virtual accountant. This is due to the cash crunch potential that exists and most small businesses. As their business operates, entrepreneurs tend to run out of money, which puts them at a higher risk for paying their loans back. Because of this, businesses that have been in operation for a certain period of time often donít qualify for traditional loans. This doesnít necessarily mean that business owners are not able to find options when they need to purchase hard assets in their business, make leaseholder improvements or even by real estate.
If businesses have been turned down from traditional banks, they should know about the Canada small business financing program. This is a program that allows small businesses to apply for a loan that uses the federal government as a guarantor on the loan. Virtuals accountant says that the benefit of this, is that businesses you are unable to qualify for other loans may be able to qualify for these. This is a great option for businesses that donít have a history in their business, or entrepreneurs who need to help fund some risky projects.
Even though thereís many advantages to this, owners should also understand that there are some disadvantages as well virtual accountant says that the amount of paperwork that banks have to go through in order to grant this loan is significant. Not only that, but the bank must also coordinate with the federal government, which usually means the bank can set their own policy even though theyíre doing all the work. Because this usually goes outside the scope of typical banks, most large banks are more reluctant to qualify and processes. While they canít quite deny it, they can decide on the security they want for the amount, and make it so unattractive that most business owners would not agree to it.
Entrepreneurs should also understand that although the federal government is backing this loan, that doesnít mean itís a zero risk loan. Not only is there the same amount of risks involved in any traditional loans, but banks are still able to ask for personal guarantee on the loan, even up to the entire amount, so if the business owner defaults on this loan, they are still going to be on the hook for it. Not only is it not a zero risk loan, virtual accountant says that thereís also interest rates, and loan application fees. The loan has a set rate of prime +3% and an application fee of 2% is a one-time fee only.
Business owners who need to qualify for financing in order to help grow their business should know that there is a program devoted to helping entrepreneurs called the Canada small business financing program. Businesses who have not been able to qualify for traditional loans may qualify for this, which can help them significantly in purchasing assets, leasehold improvements real estate that can help them grow their business.